Early in the 1990s, Spanish electric utility company Endesa began to plan and implement the BíoBío Hydroelectric Dam project, which would include the construction of a series of dams along the Upper BíoBío River in Southern Chile. Once functional, the dams would flood the surrounding communities and force their resettlement. Concerned members of the affected Mapuche/Pehuenche communities held meetings regarding the project’s ominous imposition, but without proper information detailing the project or sufficient knowledge of the extent of their rights under Chilean law, some families renounced their land rights to Endesa.
The World Bank’s International Finance Corporation (IFC) pledged a $170 million loan to Endesa for the dam’s construction. Endesa began building the Pangue Dam first, as its construction was deemed to be less environmentally disruptive than the Ralco Dam, which would be built next.
In 1995, CIEL supported the efforts of Grupo de Acción del BíoBío (GABB), which led hundreds of other NGOs across the world in filing a complaint with the World Bank, claiming that the IFC violated a number of the Bank’s environmental and social policies in funding the BíoBíoDam Project. An independent review from then-President of the International Union for the Conservation of Nature (IUCN) Jay Hair confirmed that the IFC did not adequately uphold the World Bank’s safeguard policies regarding involuntary resettlement, indigenous peoples, assessment of cumulative impacts, and the protection of wildlands. Further, Hair’s report suggested that IFC staff withheld critical environmental and social information from the IFC Board of Directors in an effort to ensure the project’s approval.
The colloquially-known “Hair Report” confirmed the long-quieted findings of anthropologist Theodore Downing. In May 1996, Downing reported intentional fraud and human rights violations by the IFC in their involvement in the BíoBío project. Under pressure from the publicity of both of these findings, the IFC announced that further loans to Endesa would only be fulfilled under the condition that outstanding environmental and social issues be resolved. Endesa prepaid their loan, thereby greatly reducing further IFC influence in the project.
The legacy of the Hair Report can still be seen in the World Bank’s internal structure; the most notable change being the creation of the accountability mechanism within the IFC known as the Office of the Compliance/Advisor Ombudsman (CAO). In July of 2002, Pehuenche community members filed a complaint with the CAO regarding municipal flooding from the Pangue Dam. The CAO accepted the complaint and conducted an investigation. As a result, the IFC relinquished the remainder of their equity stake in the Pangue and Ralco Dams, but the CAO was unable to secure any more significant resolutions for the affected Mapuche/Pehuenche people.